The campaign-finance system in the United States is unusual in one major respect: It is candidate-centered. The candidates themselves, rather than the political parties, must raise the necessary funds to run a campaign. The political parties, which choose the candidates — or at least run the process under which their candidates are selected — are severely restricted in their ability to finance their candidates’ campaigns.

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As a system purportedly designed to reduce corruption and undue influence — and upheld against First Amendment challenges on this basis — a candidate-centered fundraising system seems, to say the least, rather odd. Among other things, it places the candidates and officeholders who need campaign funds in exactly the position they should not be occupying — as supplicants, seeking financial support from those who are trying to influence them.

#ad#As one might expect, there was a reason for structuring the campaign-finance system in this peculiar and contradictory way: It is highly favorable to the incumbents who designed it. But it also has a number of other deficiencies: It favors wealthy candidates who can finance their own campaigns; it piles up campaign funds in the coffers of powerful officeholders where these funds are not needed; it discourages qualified people from running for office; it absorbs an extraordinary amount of the time and attention of officeholders, who should be spending most of their energy on the responsibilities of their offices; it increases the costs of campaigns by increasing the role of expensive consultants and other campaign specialists; it deprives voters of useful information; and it multiplies the power of special interests at the expense of a broader national interest. Most of all, it weakens the political parties, which alone have the ability both to develop popular support for a course of action and implement it with legislation.

None of these deficiencies has been addressed in all the campaign “reform” efforts that have characterized the last four decades. In fact, most of this legislation has made things worse, particularly for challengers; only the Supreme Court’s invalidation of the most egregious pro-incumbent elements of the so-called reforms has preserved for challengers some limited opportunities. Still, the remaining restrictions — on the size of contributions and, most important, on the ability of parties to fund the campaigns of their candidates — continue as substantial obstacles for those who seek to defeat incumbent members of the House and Senate.

The current restrictions on campaign funding by political parties limit both the amount that parties can contribute to their candidates and the amount that parties can spend in coordination with their candidates. In the leading case in this area, Buckley v. Valeo, the Supreme Court held that campaign-related spending coordinated with a candidate is the same as a contribution, and thus could validly be restricted by Congress. In two subsequent cases, the Court held — on First Amendment grounds — that political parties had the same rights as others to engage in unlimited “independent” or uncoordinated spending on behalf of their candidates, but that they could be restricted in their coordinated spending because party contributions could become a route by which party contributors could influence officeholders.

Thus, as the law stands today, parties are severely limited in what they do to provide direct assistance to their candidates, but are as free as any other group to spend funds independently — on an uncoordinated basis — in support of the candidates running for office under the party banner. However, independent or uncoordinated spending is generally considered by candidates and political specialists to be far less efficient and effective than coordinated spending, and is often counterproductive. As Thomas Mann of the Brookings Institution has pointed out, “diminished efficiency and accountability” are the costs of requiring that parties’ spending be independent of their candidates: “Having to set up a separate independent spending operation increases the administrative expenses borne by parties. More importantly, it runs the risk of conflicting messages and less than optimal timing of ads run by candidates and their parties.”

Consider some of the specific restrictions dictated by current law. Party committees are allowed to give directly only $5,000 per election to their House candidates and $39,900 to Senate candidates. The $5,000 cap on contributions to a House candidate is the same amount that it was in 1940, and would be worth about $65,000 in today’s dollars; the cap for a Senate candidate would be $519,000. While parties can make coordinated expenditures of $42,100 in support of their congressional candidates (the coordinated expenditure limit with Senate candidates depends on the number of voters in the state and is commensurately larger), the continued persistence of caps and coordinated expenditure limits seriously hinders the important role of political parties in our political system and is an uncomfortable reminder of the incumbent-protective nature of contribution limits.

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These limits significantly impaired the ability of both major political parties to provide direct or coordinated support to their candidates in the Senate and House races in 2008. In that year, for example, all Senate races cost a total of $389 million. Of this amount, direct party contributions totaled $694,000 (0.18 percent), and party coordinated expenditures were $5.4 million (1.4 percent). The story was pretty much the same in House races. There, all campaigns cost $808 million, party contributions were $1.8 million (0.22 percent), and party coordinated expenditures were $8.1 million (1 percent). These sums were dwarfed by the amounts that the parties spent on an uncoordinated basis in support of their candidates. In all Senate races, for example, party committees spent $117.7 million on an uncoordinated basis (30.2 percent of the total cost), and in House races, uncoordinated expenditures by party committees were $109.5 million (13.6 percent). To be sure, coordinated and uncoordinated party funds are not distributed evenly among the campaigns. In 2006, for example, most of these funds were in the form of uncoordinated spending in support of a relatively few campaigns where the parties thought they had a good chance to win. Of the amount spent to support Senate and House candidates, 61 percent (approximately $151 million) was concentrated on five Senate races in Missouri, Ohio, Virginia, New Jersey, and Tennessee, and on 15vHouse races. In those races, party spending ranged between $4 million and $6 million.

#ad#The public is generally unaware of the distinction between direct and independent expenditures by parties, because the media does not make the distinction in reporting party financial support for candidates. From the standpoint of candidates and political professionals, however, the differences between the two types of financing are significant. In 2007, Senators Corker and Bennett introduced S 1091, a bill to eliminate restrictions on parties’ financing of their candidates. In the only hearing that was held on the bill, Senator Stevens noted that “oftentimes the candidate himself or herself does not quite agree with the party in some of the advertising they bring into the state,” and much of the discussion in the hearing was about how to address the problem of an uncoordinated party ad hurting a candidate’s campaign, and whether a candidate would be able to get such an ad taken down without violating the Federal Election Commission (FEC) rules on coordination.

As might be expected if the purpose of restrictions on party financing is to undermine the campaigns of challengers, the line between coordinated and uncoordinated spending is diligently policed by the FEC, an agency composed of three Democrats and three Republicans that is carefully watched by Congress for any deviations from a strict interpretation of the campaign finance laws. In the most recent campaign reform legislation, the Bipartisan Campaign Reform Act of 2002 (BCRA), also known as McCain-Feingold after its two principal Senate sponsors, Congress vacated then-existing FEC rules that defined coordinated expenditures and directed the agency to develop a more broadly based definition. The broader the definition of coordinated spending, of course, the tighter the restrictions on communications between parties and candidates. As campaign finance expert Trevor Potter has noted, the FEC finds evidence of coordination in “inside knowledge of a candidate’s strategy, plans, or needs; consultation with a candidate or his or her agents about the expenditure; distribution of candidate-prepared material; or use of vendors also used by a candidate.”

#ad#If not carefully structured, uncoordinated expenditures could bring an FEC fine, or worse. Violation of campaign finance laws — even technical violations — are widely reported in the media and of course harmful to candidacies. Without an agreement between the candidate and the party as to the scope of the party’s independent expenditures — an agreement that might destroy the “independent” character of the expenditure — the candidate must engage in extensive fundraising anyway. Under these circumstances, only direct contributions to a candidate’s campaign, or expenditures coordinated with the candidate, are truly useful to candidates, but these are restricted by the campaign finance laws.

Although uncoordinated party spending is by far the largest portion of the permissible spending by parties, it is only a small portion — generally less than one-fifth — of the total cost of running a campaign for the Senate or the House of Representatives. For this reason, parties are important but limited campaign finance sources for their candidates; ultimately, candidates know that they are largely on their own. There is no reason why this should be true; parties are inherently better and more efficient fundraising vehicles than the candidates themselves. If freed from the current restrictions, parties could — and, we believe, would — become the primary source of campaign funds for their candidates.

–Peter J. Wallisonis the Arthur F. Burns Fellow in Financial Policy Studies at the American Enterprise Institute in Washington, D.C. A former general counsel of the U.S. Treasury department, he was also counsel to Vice President Nelson A. Rockefeller and White House counsel to President Ronald Reagan. Joel M. Gora is a professor at Brooklyn Law School and former legal counsel to the American Civil Liberties Union. As an ACLU lawyer, he represented the plaintiffs in the Buckley v. Valeo case, arguing that the requirements of the Federal Election Campaign Act violated the rights protected by the First Amendment and heavily favored incumbents.

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